Introduction

Firms have realized that creating strategies along with integrating internal functions,
suppliers and customers in a business relationship is the proper model for achieving
competitive advantage. This created the platform for supply chain Integration (SCI) as
practice being adopted by firms that were striving to improve firm performance with closer
relationships being built among other links in the supply chain. (Oracle 2006)
Definition of Supply Chain Integration
Supply chain integration is a close alignment and coordination within a supply chain, often
with the use of shared management information systems. (Ganeshan, & Harrison, 2009)
Supply Chain Integration Model

Graham C. Stevens, who was a senior managing consultant at Peat Marwick McLintock in
London published the article called "Integrating the Supply Chain" in International Journal
of Physical Distribution & Logistics Management. According to him, companies that manage
the supply chain as one entity would get ahead of the ones who don't. He also suggested a
4-stage supply chain integration model or framework as below,

Supply Chain Integration

1 2 3 4
Baseline Functional Internal External

Integration Integration Integration

Information Sharing

Figure 1 Supply chain Integration Model: Source: Graham (2011)

The Role of Supply Chain Integration
Supply chain integration is expected to combine partners’ resources and perspectives into
a firm’s value propositions, thereby allowing all companies in the network to excel in
performance. The dominant belief is that supply chain integration (SCI) is a useful
approach to improve various measures of firm performance. The basis of integration can
therefore be characterized by cooperation, collaboration, information sharing, trust,

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partnerships, shared technology, and a fundamental shift away from managing individual
functional processes, to managing integrated chains of processes. (Oracle 2006)
The Impact of Supply Chain Integration

Internal integration can help functions to leverage each other’s resources and capabilities
to jointly design products, ensure product quality and reduce duplicated tasks (Flynn et al.,
2010; Schoenherr and Swink, 2012).

Efficient external process integration allows manufacturers to speed up product delivery

processes, improve production planning and reduce inventory obsolescence using accurate
information about customer demands and preferences (Swink et al., 2007).

Further, process integration with suppliers helps manufacturers reduce mistakes and
enhance product quality through information sharing and joint planning, which are directly
related to the manufacturers’ operational performance (Petersen et al., 2005).

Product integration with suppliers and customers can enhance manufacturers’ new
product development capabilities, promoting product quality, flexibility and innovation in
addition to product competitive advantage; (Swink et al., 2007).

Lean Supply Chain

Lean supply chain (LSC) can be defined as a "set of organizations directly linked by
upstream and downstream flows of products, services, finances and information that
collaboratively work to reduce costs and waste". Management of a Lean Supply Chain is a
process aimed at eliminating waste and no value-adding activities from the overall value
stream in the supply chain (Jung et al., 2007).
Drivers to Lean Supply Chain
Driver 1: Waste Reduction
Elimination of waste is one of the key tenets of lean manufacturing. In the broadest sense,
waste can be found from all aspect of business activities. It can take in form of time,
inventory, redundant process and defects. Supply chain members must work together to

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identify and eliminate all those possible wasteful and non-value adding elements in order
to become lean. (Borac, Milovanovic & Andjelkovic, 2010)
Driver 2: Demand Management
Managing demand is by far one of most important frontier that supply chain competes in
the market place, and there is always significance room for improvement. In fact, the
performance of the supply chain viewed by the end. Consumer is largely hinged on how the
consumer demand is managed; fulfilled and satisfied. (Borac, Milovanovic & Andjelkovic,
2010)
Driver 3: Process Standardization
Process standardization enables the continous flow to run through the company and the
supply chain, which represent lenity of lean supply chain. Flow means the uninterrupted
movement of a product or service through the system to the customer. Major inhibitors of
flow are work queue, batch processing and transportation. (Borac, Milovanovic &
Andjelkovic, 2010)
Driver 4: Engaging People
Lean manufacturing differs significantly from production system in its people engagement.
To implement lean process and develop a lean supply chain, managers must start with
engaging people. This means the lean campaign is not just a brilliant idea of the Chief
Executive Officer, nor it is the job of executive board, it is task that everyone in the
organization must get involved, especially the operators and engineers in the operational
frontier on the shop floor. (Borac, Milovanovic & Andjelkovic, 2010)
Driver 5: Collaboration
Lean philosophy promotes working together and collaboration. Lean Supply Chain thrives
on collaboration. Collaboration can take place between organization within the supply
chain or across different supply chains. Collaboration often results in shred resources
leading to high level of economy scope; it also significantly reduces the business risks for
the partners by sharing it and jointly averting; it promotes technological advancement and
innovative products and services development. (Borac, Milovanovic & Andjelkovic, 2010)
Driver 6: Continous Improvement

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As lean philosophy believes the journey to improve will never end. If better is possible
good is not enough. It does not need to be a quantum leap; any small steps of changes
towards better operations will be encouraged. For example Toyota production system itself
was not designed and created by somebody overnight, but rather an ultimate result from
long years of gradually, step by step changes through the continous improvement process.
(Borac, Milovanovic & Andjelkovic, 2010)
Agile Supply Chain Concept
The concept of agility was given by (Goldman et al.1995). It means “readiness to change”,
from business perspective, agility is defined as a strategy that is more responsive in a
volatile market place, where this strategy is totally demand driven. As consumers buying
patterns are changing on a very rapid pace, so does the whole supply chain management
changes. (Alabama Technology Network 2008)

Agile Supply Chain Framework Four Major Constituents

Virtual Integration
In virtual integration information is shared among concerned departments for the real
demand from market or end consumers. As demand information is gathered than it is
collaborative planning among the various concerned departments that how to cater the
demand from this particular market and every department responds according to their
capability and capacity to fulfill the demand. (Lamming, 2016)
Process Alignment
In process alignment, three things are mainly concerned, that are Co-managed inventory, in
present time mostly chains are managed through the VMI (vendor managed inventory) this
is one of the best solution, as a co-managed inventory. Collaborative product design by the
concerned departments, this is how the team works to shape the consumer need or want.
The ultimate result is synchronous supply chain. (Lamming, 2016)
Network Based
Every individual actor in the chain has to put their efforts to make it the success of the
chain. This will reduce the burden on individual actors and the task is divided among the
actors as per their core competencies where they are best at. All actors in the chain are

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orchestrators of the chain, therefore, they equally own the chain and their performance
level matters from each end. (Lamming, 2016)
Market Sensitive
Today’s chains are market sensitive where demand is sensed from the market. The demand
forecasting is based on the daily Point of Sale (P.O.S), sensing demand from past trends is
an obsolete way to predict the demand in such a volatile markets. Therefore, daily feedback
from market or sales terminal feedback is taken to meet the future demand. (Alabama
Technology Network 2008)

Supply Chain Management Process

Meaning of Supply Chain Management

Supply Chain Management can be defined as the management of flow of products and
services, which begins from the origin of products and ends at the product’s consumption.
It also comprises movement and storage of raw materials that are involved in work in
progress, inventory and fully furnished goods. The main objective of supply chain
management is to monitor and relate production, distribution, and shipment of products
and services. This can be done by companies with a very good and tight hold over internal
inventories, production, distribution, internal productions and sales. (Ganeshan, &
Harrison, 2009)
Supply Chain Management Process
Supply chain management is a process used by companies to ensure that their supply chain
is efficient and cost-effective. A supply chain is the collection of steps that a company takes
to transform raw materials into a final product. The five basic components of supply chain
management process are discussed below:
Plan
The initial stage of the supply chain process is the planning stage. We need to develop a
plan or strategy in order to address how the products and services will satisfy the demands
and necessities of the customers. In this stage, the planning should mainly focus on
designing a strategy that yields maximum profit. For managing all the resources required
for designing products and providing services, a strategy has to be designed by the

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companies. Supply chain management mainly focuses on planning and developing a set of
metrics. (Ganeshan, & Harrison, 2009)
Develop (Source)
After planning, the next step involves developing or sourcing. In this stage, we mainly
concentrate on building a strong relationship with suppliers of the raw materials required
for production. This involves not only identifying dependable suppliers but also
determining different planning methods for shipping, delivery, and payment of the product.
Companies need to select suppliers to deliver the items and services they require to
develop their product. So in this stage, the supply chain managers need to construct a set of
pricing, delivery and payment processes with suppliers and also create the metrics for
controlling and improving the relationships. Finally, the supply chain managers can
combine all these processes for handling their goods and services inventory. This handling
comprises receiving and examining shipments, transferring them to the manufacturing
facilities and authorizing supplier payments. (Ganeshan, & Harrison, 2009)
Make/Implement
The third step in the supply chain management process is the manufacturing or making of
products that were demanded by the customer. In this stage, the products are designed,
produced, tested, packaged, and synchronized for delivery. Here, the task of the supply
chain manager is to schedule all the activities required for manufacturing, testing,
packaging and preparation for delivery. This stage is considered as the most metric-
intensive unit of the supply chain, where firms can gauge the quality levels, production
output and worker productivity. (Ganeshan, & Harrison, 2009)
Deliver
The fourth stage is the delivery stage. Here the products are delivered to the customer at
the destined location by the supplier. This stage is basically the logistics phase, where
customer orders are accepted and delivery of the goods is planned. The delivery stage is
often referred as logistics, where firms collaborate for the receipt of orders from
customers, establish a network of warehouses, pick carriers to deliver products to
customers and set up an invoicing system to receive payments. (Ganeshan, & Harrison,
2009)

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Return
The last and final stage of supply chain management is referred as the return. In the stage,
defective or damaged goods are returned to the supplier by the customer. Here, the
companies need to deal with customer queries and respond to their complaints etc. This
stage often tends to be a problematic section of the supply chain for many companies. The
planners of supply chain need to discover a responsive and flexible network for accepting
damaged, defective and extra products back from their customers and facilitating the
return process for customers who have issues with delivered products. (Ganeshan, &
Harrison, 2009)
Concept of Bullwhip Effect with a Focus on Supply Chain Management

Through the numerous stages of a supply chain; key factors such as time and supply of
order decisions, demand for the supply, lack of communication and disorganization can
result in one of the most common problems in supply chain management. This common
problem is known as the bullwhip effect; also sometimes the whiplash effect. In this blog
post we will explain this concept and outline some of the contributing factors to this issue.

Meaning of Bullwhip Effect

The bullwhip effect can be explained as an occurrence detected by the supply chain where
orders sent to the manufacturer and supplier create larger variance then the sales to the
end customer. These irregular orders in the lower part of the supply chain develop to be
more distinct higher up in the supply chain. This variance can interrupt the smoothness of
the supply chain process as each link in the supply chain will over or underestimate the
product demand resulting in exaggerated fluctuations. (Oracle 2006)

Main Reasons Contributes to the Bullwhip Effect

There are many factors said to cause or contribute to the bullwhip effect in supply chains;
the following list names a few:
Lack of Communication between each link in the supply chain makes it difficult for
processes to run smoothly. Managers can perceive a product demand quite differently

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within different links of the supply chain and therefore order different quantities. (Oracle
2006)
Free Return Policies; customers may intentionally overstate demands due to shortages
and then cancel when the supply becomes adequate again, without return forfeit retailers
will continue to exaggerate their needs and cancel orders; resulting in excess material.
Order Batching; companies may not immediately place an order with their supplier; often
accumulating the demand first. Companies may order weekly or even monthly. This
creates variability in the demand as there may for instance be a surge in demand at some
stage followed by no demand after. (Oracle 2006)
Price Variations; special discounts and other cost changes can upset regular buying
patterns; buyers want to take advantage on discounts offered during a short time period,
this can cause uneven production and distorted demand information. (Oracle 2006)
Demand Information; relying on past demand information to estimate current demand
information of a product does not take into account any fluctuations that may occur in
demand over a period of time. (Oracle 2006)
Example of the Bullwhip Effect
Let’s say that an actual demand from a customer is 8 units, the retailer may then order 10
units from the distributor; an extra 2 units are to ensure they don’t run out of floor stock.
The supplier then orders 20 units from the manufacturer; allowing them to buy in bulk so
they have enough stock to guarantee timely shipment of goods to the retailer. The
manufacturer then receives the order and then orders from their supplier in bulk; ordering
40 units to ensure economy of scale in production to meet demand. Now 40 units have
been produced for a demand of only 8 units; meaning the retailer will have to increase
demand by dropping prices or finding more customers by marketing and advertising.
(Oracle 2006)
Conclusion
Although the bullwhip effect is a common problem for supply chain management
understanding the causes of the bullwhip effect can help managers find strategies to
alleviate the effect. Hopefully this blog post has given you a simple understanding of the
term.

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References
Alabama Technology Network (2008), Agile Manufacturing Handbook, University of
Alabama, Huntsville, AL.
Borac N., Milovanovic G. & Andjelkovic A, (2010), Lean Production and Six Drivers in Lean
Supply Chain Management, presented to Ministry of Science and Technological
Development of the Republic of Serbia
Jung et al., (2007), Letting Lean into Your Supply Chain, Institute of Operations
Management
Ganeshan, R. and Harrison, T.P. (2009), An Introduction to Supply Chain Management Mc
Graw Hill Company Ltd London.
Graham (2011), Lean Model Kanban Made Simple - Demystifying and Applying Toyota's
Legendary Manufacturing Process, AMACOM
Lamming, R. (2016), ―Squaring lean supply with supply chain management. International
Journal of Operating & Production Management, Vol. 16 No. 183-96.
Oracle (2006), Lean procurement: the future of supply chain management in a
Demend driven world, An Oracle White Paper Written in Collaboration with CSS
International, Inc
Schoenherr and Swink, (2012) Leong G. Leong, Principles of Supply Chain Management,
2nd edition, South-Western, CENGAGE Learning, USA